California Gov. Gavin Newsom’s plan to woo Hollywood productions back to their cultural home got the green light on Friday, with a budget bill that significantly auguments the state’s entertainment tax credit program passing both houses in the state’s legislature.
The bill realized Newsom’s ambitions to increase the cap on California’s film and television tax incentives from $330 million to $750 million a year, making the state the most generous outside of New York and Georgia, whose program is uncapped. Though Newsom’s proposal, first announced in the fall of 2024, was initially met with skepticism, it grew in popularity, with the State Assembly voting for the increase 64 to one and the Senate voting 31 to three.
The Entertainment Union Coalition, whose members were among the most active lobbyists in favor of the legislation in Sacramento, said on Friday that the decision “underscores just how vital our industry is to the economic health of our state, and the power of our members’ voices.”
The group also called on the studios to take advantage of the increased incentives program, saying it was time for major firms to “recommit to the communities and workers across the state that built this industry and built their companies.”
Hollywood production advocates aren’t breathing a sigh of relief yet, though: They are currently racing to implement programmatic changes to the tax credit program — which would bump the base credit to 35 percent — before a July 7 deadline. That’s the date when the latest application window for productions seeking California tax credits closes.
Other changes the legislation will realize include expanding the category of productions that qualify to include shorter TV shows, sitcoms, animated titles and “large-scale competition” shows, excluding reality, documentary programming and game or talk shows. It also ends a requirement for a separate incentive for the construction of soundstages requiring the recipient to own more than half of the stages or enter into a lease of at least 10 years.
If passed, the legislation would bring the most significant changes to the program since its inception in 2009. The state has steadily been losing production as other regions beef up their incentive programs for the entertainment industry. One example: Earlier this month, Texas passed a law that increases by $100 million the amount allotted to movies and TV shows every two years.
With the funding approved through 2035, the expansion will shower as much as $1.5 billion in subsidies to Hollywood over the next decade. Currently, California is the only major production hub that bars any portion of above-the-line costs, like salaries for actors, directors and producers, from qualifying for incentives.
The three-month period from January to March saw losses in every category of production compared to the same period last year, according to the latest report from FilmLA, the nonprofit group that handles film permits for the city and county. Shooting in L.A. decreased over 22 percent over that span.
“The program not only pays for itself but generates economic activity,” said Dee Dee Myers, senior adviser to Newsom, at the UCLA Entertainment Symposium on Friday. “It’s a good deal for taxpayers.”
